Avoid Common Lease Mistakes Made By Residential Landlords

Time and time again, we see landlords encounter issues with tenants that were completely avoidable. A well drafted lease can include provisions that safeguard landlords against some very typical problems and save the landlord time and money in the future.

One of the most common problems encountered by a landlord is a tenant that is consistently late with rent payments. These tenants cause landlords grief month after month when they fail to live up to their obligations in a timely fashion. Most leases declare nonpayment as a breach or default in the lease, but Michigan law considers the failure to pay “cured” when the tenant actually pays, even if the tenant always pays late. Once a default is cured, the landlord has no basis to evict a problem tenant. However, for example, if the landlord has defined an “event of default” in the lease as “paying rent after the due date on three or more occasions during the lease term,” then the landlord reserves for itself the option to declare the tenant’s late payments an “event of default” under the lease and can thereby seek to terminate the lease without the tenant being permitted a right to cure.

Another frequent issue involves damages to the leasehold. The scenario is all too familiar; tenant vacates the leasehold at the end of the term and landlord discovers that the property has been trashed. In Michigan, the landlord is limited to keeping no more than one and a half months rent as a security deposit, which often does not cover the damages done to the leasehold. In order to apply a security deposit to costs associated with repairing the property, and to seek collection against the tenant for any damage costs exceeding the security deposit, the landlord must have a completed commencement checklist on file documenting the condition of the property at the beginning of the lease term and a similar termination checklist marking the condition at the end of the lease term. MCL 554.608. Form checklists can be found here. It is recommended to make these lists part of any landlord lease form and not consider the relationship properly documented until the commencement portion has been completed by the tenant. The landlord must also comply with some strict timelines for giving notice to the tenant after the tenant has vacated the leasehold. MCL 554.609. If the landlord fails to abide by these requirements, the landlord provides the tenant several defenses against a landlord action for damages and could result in the landlord being ordered to return twice the amount of the security deposit to the tenant. MCL 554.613.

There are many other typical problem areas that can be anticipated and addressed in advance with careful lease drafting such as controlled substance use, tenant insurance obligations, limited rights to cancel, and compliance with applicable state and local laws. We encourage landlords to plan in advance with the advice of an attorney to minimize future risk and aggravation.

For assistance with lease drafting or for a review of your current lease, please contact Abby Cooper or Jamie Stewart at 810-227-3103.

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